Will Diageo Need A Stiff Drink Following FY Results?
Spreadex | Jul 24, 2018 12:06
Will Diageo (LON:DGE) need a whisky drink (or a vodka drink, or a lager drink, or a cider drink) following Thursday’s full year results?
The drinks behemoth has managed to turn things around after a tough start to the year. Opening at £27.33, it had fallen to £23.46 by the end of March, the stock’s worst price in 8 months. However since then the company has seen a good run of form, culminating in an all-time high of £28.85 on July 20th. Diageo PLC now sits at a current trading price of £28.58.
The firm’s last update came all the way back in January, when it posted its interim statement. For the 6 months to the end of December, net sales rose 1.7% to £6.5 billion, with ‘all regions’ contributing to that growth. Pre-tax profit, meanwhile, came in at £2.2 billion, undershooting estimates by around 3.3%, but with a 6.1% jump in operating profit to £2.19 billion and a 5% hike to its interim dividend to 24.9p per share.
As for the drinks themselves, Tanqueray was the star, seeing a 15% rise in reported net sales, followed by 6% increase from Johnnie Walker and Baileys. At the other end of the spectrum, Smirnoff was only one of Diageo’s ‘global giants’ to see a decline, with sales down 3% year-on-year.
In terms of Thursday’s update, investors may want a comment or two on the potential cost of the 25% tariffs the EU is seeking to put on US whiskey. Diageo also stated back in January that it forecast a £60 hit to full year operating profit and a £460 slash to sales due to the pound’s rise against the dollar, so it’ll be interesting to see whether those figures have changed given cable’s recent collapse.
Diageo PLC has a consensus rating ‘Buy’ alongside an average target price of £27.15.
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